We asked 6 big-money investors about their biggest fears — and they all had the same answer

This trader turned into a White Walker during a particularly scary conversation about Federal Reserve balance-sheet tightening.
AP Images / Bernd Kammerer
What keeps you up at night?

It's a question you'd expect to draw a wide range of responses when posed to investors responsible for tens of billions of dollars. After all, it's not exactly as if there's a shortage of anxiety-inspiring headlines floating around each day.

But as Business Insider found out through a series of interviews, there's one worry to rule them all: the Federal Reserve's reversal of the unprecedented monetary stimulus that helped drag the US out of the latest financial crisis.

More colloquially described as the Fed "unwinding" its balance sheet, the mere prospect of it happening is apparently enough to strike fear in to even the most experienced money manager.

Don't believe us? See for yourself. Below is a collection of excerpts from seven interviews conducted by Business Insider, many of them by the deputy executive editor Matt Turner. Each arrives at the same potentially horrifying conclusion.

His biggest market worry: "One of the things that always keeps up at night is the risk of a policy mistake. I tell people, 'Look, every time I checked, every one of the central banks all around the world, the pencils come with erasers at the top.' There's no infallibility. Vatican City's the only place that claims infallibility. Central bankers do not have that, nor do they claim it. We have to also understand we're living through what has been the greatest monetary-policy experiment in history. We've never seen this before.

"Think about the Federal Reserve, the Bank of England, the European Central Bank, Bank of Japan, what they've all engaged in is this extraordinary balance-sheet expansion that commonly has been known as quantitative easing. That's been extraordinary in terms of helping stabilize markets and allowing the economy to recover. Now we're in the process, the very early, beginning stages of policy normalization. That's going to be a bit of a challenge, so there is no rulebook, there's no guidepost to how we do this.

"I think what it's going to require is very prudent actions by central bankers; they're going to have to be cautious in terms of how they apply policy changes. They're going to have to be very open and transparent with markets about what they intend to do and what they are doing. I'd say, if you ask me what the biggest concern I have, is for a policy misstep. It's that somewhere along the line, central bankers get it wrong, either they move too quickly or they move too slowly."

His biggest market worry: "A few a different things. One, of course, there's the possibility that in the unwind of QE, something huge happens. I think that that's more likely to stem from another region of the world outside the US — not a huge likelihood, but it worries me."

His biggest market worry: "For us, the No. 1 concern is Federal Reserve policy. If they remove too much stimulus too quickly, if they raise rates too fast, that would be a likely cause for the economy to turn down. Basically, it's this idea that they start to take away the punch bowl."

David Hunt, President and CEO of PGIM ($1 trillion+ AUM)

Business Insider

On the Fed balance sheet unwind: "There's no question that we have real policy risk. I mean, never before in the last 30 years have we seen so much of economic activity dependent on, not just the Fed, but I would generalize it to central banks around the world and the very accommodative policies. So there is a lot riding on the fact that they can begin to normalize those policies in an effective way.

"And that isn't just when they decide to raise rates, and at what pace, but also what they do with the balance sheet. One of the big challenges for the Fed is going to be at what pace they begin to unwind that balance sheet, and I think that remains one of the big risks that investors face."

Matt McLennan, Head of the Global Value Team at First Eagle Investment Management ($55 billion AUM)

Business Insider/The Bottom Line

On the Fed: "We've brought a lot of growth forward through easy policy, and now that the policy environment is tightening with interest rates going up, the Fed talking about shrinking its balance sheet ... The policy environment could become trickier at a time of lower expected returns."

On the Fed balance sheet unwind: "It's going to be the pace of the unwinding that really dictates the concern. Yes, there's uncertainty associated with that, but if they do it at a more gradual pace, the market is expecting that. If that ends up being the case, it probably won't be as much of a headwind as the market fears. But still, the faster the pace of unwinding and Fed rate hikes, the bigger risk it poses."